When Does an Insurance Company Total a Car?

Totaled automobileDetermining whether an automobile is a total loss is dependent on various factors, but generally if the cost to repair the damaged vehicle exceeds or reaches a certain percentage of the actual cash value (ACV) of the car it will be declared a total. If repair costs exceed the ACV it will not make financial sense and the policyholder will be compensated for the loss.

Depending on the state and an insurer's guidelines a percentage may be used to determine whether an automobile will be fixed; some states set a certain percentage where a carrier must declare the vehicle a total loss. In states that allow insurers to set their own percentage it will vary by company; a carrier may total a vehicle if damages reach 51-80% of a car's value.

How Auto Insurance Companies Determine Total Losses

Once a claim is filed by a policyholder a claims adjuster will assess the damage; this is generally done in a few different ways. The adjuster may come to the insured's home, some companies have drive up facilities the policyholder can take their vehicle to or the adjuster will visit the repair shop where the automobile was towed to; since the subject of total losses is being discussed, it is likely that the adjuster would be assessing the damage at a repair facility since the vehicle will probably be inoperable.

The claims adjuster will be sent out to inspect the automobile and determine the amount that it would cost to repair the vehicle. Adjusters are trained to spot damage on all areas where the automobile was struck, even some which may not be seen by the untrained eye. In many cases the adjuster will ask the repair facility to perform a "teardown" or in other words remove the visibly damaged parts to make sure that there is no hidden or structural damages behind these parts in order to get as accurate of an estimate of repair costs as possible.

Once the adjuster has observed the vehicle they will then add up the cost of the replacement parts and labor necessary to complete the repairs; this is usually done using third party software which also determines the threshold of the repair. Depending on auto insurance companies or a state's threshold, if the cost to repair is over a certain percentage of a vehicle's worth it will be declared a total loss.

Damaged blue carAlthough it may not make sense to some to total a vehicle when the amount of damages only reach 75% or less, there are other factors that are also considered such as towing costs, the price of a rental car and additional damage that may be found during the repair and push it further over the threshold; this may make it uneconomical to fix the damage at which point the company will settle with the policyholder.

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